WTI crude oil prices slipped below $60 a barrel Tuesday, on growing expectations that major oil producers will agree to ease production cuts at a key meeting this week on bets that crude demand will likely outstrip supply as the global vaccine-led recovery gathers pace.
On the New York Mercantile Exchange, crude futures fell $0.89 to settle at $59.75 a barrel, while on London’s Intercontinental Exchange (NYSE:ICE), Brent fell $0.99 to trade at $62.70 a barrel.
Ahead of the OPEC and non-OPEC producers virtual meeting due Thursday, Saudi Arabia and Russia reportedly disagree over whether to stick with or twist output cut pledges agreed to last year. Russia is expected to push for a further increase in supply, while Saudi is eager to keep supplies tight in order to take advantage of higher prices.
OPEC+, led by Russia, initially agreed to slash oil production by 9.7 million barrels per day last year, but have gradually reduced supply cuts to 7.2 million bpd from January. Saudi Arabia, meanwhile, agreed to take on voluntary cuts of 1 million from February through March, to offset an uptick in production from Russia and Kazakhstan.
Against the backdrop of improving demand amid an increase in the pace of vaccinations, inventories have tightened faster than expected, pressuring global supplies to fall at their fastest pace in two decades and prompting calls for major oil producers to ease their output cuts.
“[W]e expect OPEC+ to fall behind the market rebalancing, as the pace of draws during the vaccine-led recovery will likely outstrip their ability to ramp up. Second, there are still no signs of higher activity among most non-OPEC+ producers outside of North America, creating risks that output falls 0.9 mb/d short of our forecasts over the coming year,” Goldman Sachs (NYSE:GS) said in a note.
Ahead of the meeting, traders expect to see further signs of a supply-demand imbalance, with the U.S. expected to report a drawdown in weekly inventories.
U.S. petroleum inventory data from the American Petroleum Institute, an industry group, is due later in the session at 4:30 PM ET, while official data from EIA is set to be released Thursday at 10:30 AM ET.
The EIA is expected to report U.S. crude stockpiles fell 928,000 barrels last week, following a build of 1.285 million barrels in the prior week.
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